Carbon tax: bosses split over change or abolition

Big business is divided over Labor’s carbon tax. Miners and manufacturers want it scrapped while energy and transport giants are ­seeking modifications and greater certainty, amid opposition threats to dismantle the tax.

Energy and building companies warned yesterday that Opposition Leader
Tony Abbott
’s plan to dismantle the new law if he won the next election would stifle investment and make it impossible for companies to predict costs.

“It makes it difficult for businesses to operate with the right ability to assess the impact of the carbon tax,"
Lend Lease
chief executive
Steve McCann
told shareholders yesterday.

Origin Energy
boss
Grant King
, who supports a market-based price on carbon, said the tax was a step in the right direction but there were still issues, such as the role of gas in reducing emissions, to be worked through.

“A lot of the success of the package in the long term will depend on setting up tight governance and clear principles for implementation of complementary policy," Mr King said.

Industry groups are divided between those who want modifications or abolition of the tax and those who are resigned to the changes but are worried about uncertainty that could affect investment.

Miners and manufacturers are the biggest opponents, fearing billions of dollars in additional production costs will make them less competitive against their overseas counterparts.

“Why would this country shoot itself in the foot implementing an impediment to its export-competing industries and attractiveness as a capital destination with a tax impost that’s significantly higher than we’re likely to see in any other part of the world?" the managing director of mining investment firm Pacific Road Group,
Paul Espie
, said.

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Analysts said companies such as
Qantas
and
Virgin
Australia and building materials makers
Boral
and
CSR
would pass on some costs to ­customers.

“There are plenty of businesses, now that it is law, which are looking to get on with it," Deutsche Bank analyst Tim Jordan said. “The fact there is political uncertainty is a factor. Businesses are going to be cautious about low­-carbon investment."

Mr Jordan said steelmakers
One­Steel
and
BlueScope Steel
would qualify for free carbon units and cash grants, while AGL Energy was expected to benefit in 2013 from higher electricity prices.

Credit Suisse predicts Origin Energy will only pass on 80 per cent of costs through electricity prices and says there is a 20 per cent risk of the tax being repealed by an incoming conservative government.

Investment banks could benefit by providing carbon trading advice to business on the risks, but analysts said these services would be limited during the fixed-price phase.

Big rail operators and logistics groups are unfazed by the carbon tax. They are confident about passing higher fuel costs on to customers and see opportunities to encourage customers to shift more business to rail.

Toll Holdings
, which has described an emissions trading scheme as a “responsible approach", says it will be in a good position to promote transport that has relatively low carbon emissions, such as sea and rail.

Other sectors, such as trucking, must wait two years to find out whether a carbon tax will apply to heavy vehicles. “The ins and outs of what the opposition does, we’re not buying too much into it," NatRoad chief executive Bernie Belacic said. “Just make sure you are not applying it to diesel as it will have an unwanted outcome."

Mining companies are concerned that the carbon tax will raise their production costs when overseas producers do not face the same impost.

“Many of the concerns we held about the original [resource super profits tax] proposal [regarding] international competitiveness and the disincentive to invest in relation to Australia, may also apply to the government’s proposed carbon tax,"
Rio Tinto
chairman
Jan du Plessis
said in Sydney last week.

BHP Billiton
chairman
Jac Nasser
had urged the government to consider implementing the tax at a slower pace due to the weak state of the ­global economy.